Simulating Wall Street

B-schools make finance real for students. Plus: Will Gideon Yu do for Facebook what he did for YouTube?
Kate PlourdSeptember 1, 2007

Business and finance students are getting the Wall Street experience they’ve always wanted, but not on Wall Street. Several universities, including the Massachusetts Institute of Technology, Ohio State, and the University of Texas, have introduced high-tech labs that bring the tools of Wall Street right into the classroom.

At Pennsylvania’s Villanova University, for example, the Applied Finance Lab is outfitted with two Bloomberg terminals, 13 Reuters stations, stock tickers, and LCD screens. Using those tools to research companies and conduct performance analyses, more than 150 students manage five equity portfolios worth $580,000 in real money for a class assignment or as part of the school’s investment club.

Such real-life experience gives students the upper hand entering a competitive workforce and allows them to “walk into an interview with a skill that can be put to immediate use,” says Villanova finance professor David Nawrocki. Access to state-of-the-art technology counts for a lot: a few years ago, a student used a search engine instead of Bloomberg or Reuters and obtained an inaccurate share price, causing a $40,000 trading error.

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At MIT’s Laboratory for Financial Engineering, students learn more than just how to use financial technology. They help develop new technology for pricing and hedging options and create new methods of nonlinear time series analysis. They also
research the public-policy implications of financial technology.

Whether such knowledge will help them successfully navigate roiling markets remains to be seen. But Villanova’s Nawrocki says students will at least hit the ground running. And who knows? Perhaps the next analysis they devote themselves to will involve choosing between a Lamborghini and a Maybach.

Facebook Faces the Future

When Gideon Yu became CFO of YouTube last September, analysts took it to mean that the high-flying Internet firm was in IPO mode. Instead, Yu oversaw its $1.7 billion sale to the even-higher-flying Google Inc. Now that the 36-year-old has made the jump to Facebook Inc., analysts are debating the fate of the social networking site.

Greg Sterling of Sterling Market Intelligence, for example, predicts a takeover by either Google or Microsoft. But he admits it’s easy to get caught up in speculation. “People always see a new CFO as positioning the company for a specific purpose,” he says. Another potential buyer is Yahoo, whose reported $1 billion offer was rebuffed last year.

The other possibility, of course, is a public offering. Facebook board member Jim Breyer hinted at that option when he told a panel in July that Facebook was not for sale and would surely do “well over $100 million in revenues” this year. Such numbers, combined with expanded membership, have led analysts to speculate that the company’s value is guaranteed to grow past the current estimate of $2 billion to $6 billion.

Yu is mum on the subject, but CEO Mark Zuckerberg maintains that Facebook will remain independent for now, keeping speculation over the fate of the site more than idle chat. — K.P.